The Biden Administration’s Inflation Reduction Act significantly raised the bar for federal tax credits for electric vehicles, making it more difficult to get the full $7,500 tax credit.
As reported by Road & Track magazine, the updated regulations have new requirements related to battery sourcing, giving preference to USA-made batteries.
Under the guidelines, the $7,500 tax credit applies to electric vehicles and plug-in hybrids manufactured in the United States. Additionally, the vehicles must have a purchase price below $55,000 for cars and $80,000 for sport utility vehicles.
Now, an electric vehicle must contain a certain percentage of U.S.-sourced battery materials to qualify for the full $7,500 tax credit. This provision means a substantial reduction in the number of eligible vehicles. Sourcing of battery materials is tricky, because the Biden Administration has taken a decidedly anti-mining stance through the Department of Interior Bureau of Land Management.
One of the most notable impacts will be to entry-level versions of the Rivian R1T and R1S, which will no longer qualify for any sort of credit.
Previously, the Audi Q5 plug-in, BMW 3-Series and X5 plug-ins, Genesis Electrified GV70, Nissan Leaf, Volkswagen ID.4, and Volvo S60 plug-in all qualified for some level of tax credit, as these models were manufactured in the United States. However, the recent changes have struck these vehicles from the eligibility list.
The updated regulations have also impacted the tax credit amount for other EV models. The Ford E-Transit, Mustang Mach-E, and Jeep’s plug-in hybrid Wrangler and Grand Cherokee 4XE models, which previously received a $7,500 tax credit, will now only qualify for a credit of $3,750. The tax credit for the Tesla Model 3 has been halved, though all other versions of the Model 3 and all Model Y variants remain eligible for the full $7,500 credit.
General Motors, formerly owned by the federal government, has fared better under the new regulations. All its EVs priced under $80,000 will still qualify for the full $7,500 tax credit, including the Chevrolet Bolt, Blazer, Equinox EV, Silverado EV, and Cadillac Lyriq.
